In Indonesia, just as is the case in many other countries, ownership of land can often prove to be a wise investment which will bring much profit to the landowner. Those interested in owning land in Indonesia ought to read this article for further information about this topic.
Land Acquisition in Indonesia
Indonesian law recognizes two types of land acquisition by a foreign-owned company (PMA). One type is acquisition of unregistered and uncertified land; the other is acquisition of registered land. To acquire land, a PMA is required first to obtain a location permit except under certain circumstances in which the company is exempt from the requirement. A location permit allows a PMA or any other company to acquire land and obtain a land title. In Indonesia, land titles are usually completed within three years and also have the possibility of a one-year extension if at least 50% of the total land area has already been acquired. A location permit provides a right for the PMA to acquire land. However, it does not require the company to acquire all of the land stated in the location permit. It also does not force the landowner to sell all owned land to the company. The maximum area of land to be acquired by the PMA is, however, stated in the location permit.
Acquisition of unregistered land is more complex than acquisition of registered land because it can be difficult to run a complete and thorough background check of the history of the land in question. Such background checks will include the land’s history of legal ownership as well as any related environmental documents. Acquisition of unregistered land is usually done through a private sale between a landowner and a buyer. However, it should be noted that a deed of transfer signed in front of a certified land-deed official (PPAT) at the location of the land is required for registration with the relevant land office. On the other hand, acquisition of registered land is usually done through a deed of transfer in front a PPAT at the location of the land. This is to be followed by the registration and recording of the transfer with the relevant land office. Land checks for registered land are usually conducted at the district courts and the relevant National Land Agency (BPN) office before the transfer is completed. These checks enable prospective landowners to appropriately manage any existing disputes as well as assess the history of transfers of the land in question.
Basic Agrarian Law
Land and property in Indonesia are governed by the Basic Agrarian Law. This vital piece of legislation includes elements of both customary (adat) laws and laws introduced by Dutch colonial rulers. Before the Basic Agrarian Law was created, adat laws governed land registration for Indonesians; Dutch colonial laws did likewise for foreigners. The Basic Agrarian Law was therefore created to set up a single regime which would end the dual laws which governed land matters while at the same time maintaining some of the concepts applicable to land according to adat laws.
According to the Basic Agrarian Law, the government has the authority to determine the purposes for which land is to be used, the relationship between land and individuals or groups of individuals, and the consequences of legal actions involving land.
Certified and Uncertified Land
All land in Indonesia is classified as either state land and private land. With regard to private land, the Basic Agrarian Law introduced the classification of land rights and a registration system. This in turn led to the creation and issuance of land certificates by the BPN. Such certificates serve as evidence of legal rights to land. They include information on the land title rights, titleholder’s name, land area, title period, issuance date, and security matters related to the land the land. However, in spite of the existence of the land registration system, much private land in Indonesia remains uncertified. Many landowners in Indonesia attempt to use the girik right to support their claim. However, the girik right is not official evidence of rights to land. It is merely a land tax receipt detailing payment for taxes imposed over the land purchased. However, in cases in which there is no land right certificate present, a girik letter may be used as proof of ownership of uncertified land if it is supported by certain documents which provide sufficient evidence of ownership.
Land Rights in Indonesia
Right of Ownership
The right of ownership is a right that provides a landowner with complete rights over owned land in Indonesia. There is an expiration date imposed on the ownership of the land. Only Indonesian citizens and businesses are entitled to the right of ownership. However, these businesses do not include locally-owned companies (PTs) or foreign-owned companies (PMAs). If it happens that the holder of the right of ownership is a foreigner who owns a PMA, the foreigner must convert the right of ownership into other rights.
Right to Build
The right to build is the most common land right which is often owned by PMAs which are based in Indonesia. The right to build is a right related to state land. It allows its holder to use the land to construct specific buildings. The right to build is granted for anywhere up to 30 years; it can also be renewed for up to 20 years. The right to build may be held by either individuals or business entities. This right can be transferred to other eligible third parties for as long as it is active.
Right to Cultivate
The right to cultivate is a right related to state land which allows its holder to use the land in question for agricultural purposes. The right to cultivate has a validity of anywhere between 25 and 35 years. Renewals may extend the validity period by up to 25 years. Either individuals or business entities based in Indonesia may hold the right to cultivate. This right is transferable to eligible third parties while it is valid; however, such a transfer is to be registered with any relevant land office in Indonesia.
Right of Management
The right of management is a right given by the government. It allows its holder to control land. This right is only granted to national and regional government agencies, state-owned companies, regional government-owned companies, limited liability state-owned companies, special-authority agencies, and certain government-affiliated legal entities.
State-owned companies may use their right of management to sell related land to PMA companies. When such companies choose to do so, the state-owned company and the PMA company which are involved will become part of a cooperation agreement. As part of such an agreement, the PMA company will gain the right to use the land in question as well as the right to apply for the right to construct buildings on that land. Building rights related to such land may also be mortgaged to a third party.
Right to Use
The right to use is a right to utilize land for any purpose as well as to collect products gained from the ownership of such land. It is available to Indonesian citizens, Indonesian business entities, foreigners who are living in Indonesia, foreign business entities currently operating in Indonesia, representatives of foreign countries or international institutions, national and regional government institutions and agencies, and social and religious institutions. The duration of the right to use is limited. Under certain circumstances, this right is also transferable.
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Ownership of Land in Indonesia FAQs
The latest statistics show that the average price of houses in Indonesia’s 14 largest cities increased by 0.16% over the one-year period which concluded at the end of the first quarter of 2019. Over this same period, there was a significant increase in sales of residential properties in Indonesia. Such sales increased by 23.77%. Despite these statistics, however, property prices in Indonesia are lower than in previous years if one adjusts for the effects of inflation.
Foreigners are allowed to own land in Indonesia. They also have the right to build on such land. This is because the government believes that the granting of such rights to foreigners provides a significant degree of legal certainty regarding ownership of property and land. This legal ownership is expected to increase the level of property investments across Indonesia.
Across the world, land prices have been increasing. They are the primary reason why global housing costs have increased dramatically in recent years. In Indonesia, such has also proven to be the case. However, it is certainly possible to purchase land at a reasonable price in Indonesia. In the least expensive areas of the country, land may cost as little as 40 million rupiah (US$2,800) per 100 square meters. On the other hand, land in the most expensive areas of the country may cost up to 300 to 400 million rupiah (US$21,200 to US$28,300) per 100 square meters.